Yahoo Finance First American (FAF) Q1 Earnings & Revenues Miss Estimates
First American Financial Corporation FAF reported first-quarter 2024 operating income per share of 45 cents, which missed the Zacks Consensus Estimate by 32.8%. The bottom line increased 2.2% year over year.
The insurer’s results reflect soft performances in the Title Insurance and Services segment and lower investment income, partially offset by improvement in the Home Warranty segment.
First American Financial Corporation Price, Consensus and EPS Surprise
First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote
Behind the Headlines
Operating revenues of $1.4 billion decreased 1.4% year over year due to lower direct premiums and escrow fees, agent premiums, as well as information and other. The top line missed the Zacks Consensus Estimate by 2.5%.
Investment income was $127.9 million in the first quarter, which decreased 4.5% year over year. The figure was lower than our estimate of $141.2 million.
Expenses declined 1.4% to $1.3 billion. Our estimate was $1.4 billion.
Segment Results
Title Insurance and Services: Total revenues decreased 2% year over year to $1.3 billion. The downside was due to lower direct premiums and escrow fees, agent premiums and information and other. The figure was in line with our estimate. Investment income of $117 million decreased 6% year over year. The decline was primarily due to lower average interest-bearing balances in the company’s escrow and tax-deferred property exchange balances. It was partly offset by higher interest income from the insurer's warehouse lending business.
Adjusted pretax margin contracted 200 basis points (bps) year over year to 4.8%. Title open orders decreased 10% to 155,500. Title closed orders decreased 3.6% to 102,700. The average revenue per direct title order increased 2.5% to $3,516, primarily attributable to a shift in the mix from lower premium default transactions to higher premium purchase transactions and an increase in the average revenue per order for purchase transactions.
Home Warranty: Total revenues increased 1% to $105.2 million. The figure was higher than our estimate of $93.8 million. Pretax income of $20.3 million increased 27.6% year over year. The claim loss rate was 41.7% in the first quarter, contracting 560 bps, primarily due to fewer claims and lower claim severity. The pretax margin was 19.3%, which expanded 400 bps year over year.
Corporate: Net investment income was $10.3 million in the first quarter, which increased 28.7% year over year. The growth was primarily attributable to changes in the value of investments associated with FAF’s deferred compensation program. The uptick was largely offset by higher personnel expenses reflecting returns on the plan participants’ investments.
Interest expense was $11.9 million in the first quarter, which decreased 9.8% year over year. The decrease was due to the repayment of the company's $250 million senior notes, which matured in February 2023.
Financial Update
First American exited the quarter with cash and cash equivalents of $1.5 billion, down 58.2% from the end of 2023. Notes and contracts payable were $1.4 billion, up 0.1% from the end of 2023.
Stockholders’ equity was $4.7 billion, down 1.2% from the 2023-end level. The debt-to-capital ratio was 30.3.
Zacks Rank
FAF currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Chubb Limited CB reported first-quarter 2024 core operating income of $5.41 per share, which outpaced the Zacks Consensus Estimate by 2.3%. The bottom line increased 22.7% year over year. Net premiums written improved 14.1% year over year to $12.2 billion in the quarter. Our estimate was $11.4 billion, while the Zacks Consensus Estimate was pegged at $13 billion.
Net investment income was $1.4 billion, up 25.7% year over year. The Zacks Consensus Estimate was pegged at $1.3 billion, while our estimate for the same was $1.4 billion. Property and casualty (P&C) underwriting income was $1.4 billion, up 16.7% year over year. Global P&C underwriting income, excluding Agriculture, was $1.3 billion, up 10.9%.
RLI Corp. RLI reported first-quarter 2024 operating earnings of $1.89 per share, beating the Zacks Consensus Estimate as well as the year-ago number by 16%. Operating revenues for the reported quarter were $394 million, up 17.6% year over year, driven by 17% higher net premiums earned and 21.3% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.1%.
Gross premiums written increased 13% year over year to $468 million. This uptick can be attributed to the solid performance of the Casualty (up 12.6%), Property (up 13.5%) and Surety segments (up 12.1%). Our estimate was $511 million. Underwriting income of $77.7 million increased 16%. Combined ratio deteriorated 60 bps year over year to 78.5. The Zacks Consensus Estimate for the metric was pegged at 85, while our estimate was 77.7.
Brown & Brown, Inc.’s BRO first-quarter 2024 adjusted earnings of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 18.7% year over year. Total revenues of $1.25 billion beat the Zacks Consensus Estimate by 3.8%. The top line improved 12.7% year over year. The upside can be primarily attributed to commission and fees, which grew 11.6% year over year to $1.2 million. The Zacks Consensus Estimate for commission and fees was pegged at $1.1 billion.
Organic revenues improved 8.6% to $1.15 billion in the quarter under review. Investment income more than doubled year over year to $18 million. The Zacks Consensus Estimate for the metric was pegged at $17.3 million. Adjusted EBITDAC was $466 million, up 17.1% year over year. EBITDAC margin increased to 37% year over year from 35.7%. Total expenses increased 8.7% to $894 million.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
RLI Corp. (RLI) : Free Stock Analysis Report
Chubb Limited (CB) : Free Stock Analysis Report
First American Financial Corporation (FAF) : Free Stock Analysis Report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
